Prospa is now open on Saturdays. Call our team between 10am & 4pm to discuss your loan.

Home » Blog » Can I dismiss a difficult employee?

Can I dismiss a difficult employee?

Managing employees can, at times, be a challenging part of running a business, and a difficult or underperforming employee makes it even harder.

The problem of a difficult employee is unlikely to simply go away or resolve itself. Here we unpack the key steps and considerations you need to make when managing a difficult or underperforming employee – from recognising the signs to employee dismissal.

Recognising the signs – is it time to take action?

There are usually multiple contributing factors if you’re at the point of taking formal action against an employee.

If you have serious concerns about an employee’s performance or conduct, have spoken to them about it and the problem is getting worse, it may be time to take action.

Other warning signs include:

  • Complaints about the employee from customers or co-workers.
  • Distracted or unhappy colleagues.
  • Declining productivity (both the employee and wider team).

Know your options

So, you’re ready to do something – but what can you actually do?

Before taking action, consider performance management.

The Fair Work Ombudsman suggests these five steps to manage an employee’s performance:

  1. Identify the problem: Is the employee just not doing their job? Is their work not up to scratch?
  2. Analyse the problem: How serious is it? How long has it been going on?
  3. Discuss the problem with the employee: The meeting should be private and non-threatening.
  4. Come up with a solution together: Explore ideas, find some common ground, focus on the positives and offer assistance.
  5. Monitor performance: You may need to take more serious action if the employee’s performance doesn’t improve.

If performance management is unsuccessful, there are three ways an employee’s time with you may come to an end:

1. Resignation

Sometimes, discussion of the issue will prompt the employee to rethink their position and future – and they may decide to leave on their own.

2. Redundancy

If the employee’s job can be absorbed or eliminated due to, for example, automation or a slow-down in business, making the employee redundant is an option.

3. Dismissal

To fire an employee, you must have a valid reason based on their capacity or conduct.

Redundancy and dismissal: Know the legalities

Legal requirements must be satisfied in order to dismiss an employee or make them redundant, so do your due diligence to avoid the even bigger headache of legal action against you by that employee.

If you’re making an employee’s job redundant, they may be entitled to a redundancy payment. These types of payouts depend on the number of staff you employ as well as how long they’ve been with the business. Check with the Fair Work Ombudsman for clarification.

It’s also important that the redundancy is genuine and you’ve followed any consultation requirements according to the relevant award or agreement.

If you dismiss an employee, it must be done fairly. Theft, fraud and violence are sufficient reason for immediate dismissal. Less-serious cases based on the employee’s conduct or capacity sometimes require you to follow a process that may involve discussions and warnings. If you employ fewer than 15 people, the Small Business Fair Dismissal Code sets out all the requirements.

How to maintain staff morale after an employee is dismissed

One employee’s issues can create a ripple effect across the whole team, and lower morale could affect their motivation and productivity levels.

To give workplace morale a boost, try some of these strategies:

  • Ask for suggestions: What do your people think will help them feel happier and motivated at work?
  • Give recognition: A little public praise or token of your appreciation can go a long way.
  • Offer flexibility: Helping your people balance their work and life can be a positive for everyone.

Ready to move on from a bad employee experience and grow your business? Start by speaking to the small business experts at Prospa on 1300 882 867 or apply online for a smart loan to keep up the momentum in your business.


The information in this post is provided for general information only and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from financial, legal and taxation advisors. Although every effort has been made to verify the accuracy of the information as at the date of publication, Prospa, its officers, employees and agents disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy, or omission from the information for any reason, including due to the passage of time, or any loss or damage suffered by any person directly or indirectly through relying on this information.

Keep reading

Business finance: Last century lending vs today

11 February 2020 | 1 min read

More and more small businesses are ditching the old way of borrowing. Here’s why and what’s changed about business finance this century.

Keep reading

How to improve your credit score

22 January 2020 | 4 min read

A poor credit score can be a handbrake on your business, limiting your access to finance or making it more expensive. Here’s some tips on how to improve your credit score.

Keep reading

4 advantages of keeping personal and business finances separate

28 October 2019 | 3 min read

If you’ve got some of your personal finances mixed in with your business finances, here’s four reasons why you might consider starting the separation process.

Keep reading

Subscribe to the Prospa Blog

Be inspired! Sign up to Prospa’s newsletter to receive tips, tools and small business success stories straight to your inbox.